How To Become a More Successful Investor

A recent survey of Wharton Global Family Alliance, which is a discrete club of the world's wealthiest families (they will need to have over $100 million in order to be part of this alliance) members put the participating families into categories. The first was a "more successful" group and the second was a "less successful" group. The key to keep in mind about these two groups is that these wealthy families fared extremely well during the last market correction, with the worst losses in the 6% range and most of them actually earning returns while the rest of ended up losing money.

There were several key take-aways from the survey, however which most of us (who are not quite at the $100 million level just yet) can incorporate into our own investment process.

Clearer Direction

Probably one of the most important things we can do when meeting with our financial planners and investment advisers is provide extremely clear guidance and investment objectives. Instead of completing an asset allocation model and handing it over to your planner and adviser and taking every recommendation at face value, let your planner and adviser know what is important to you. If it means half of the equity portion of your portfolio needs to be in dividend paying equities, then be clear on that directive. If you want only mid-cap funds within your portfolio, explaining this will only yield positive recommendations and waste less of everyone's time before the actual investments take place.

Clearer directions will also come down to the following point, but it should be noted that they will give you a more active role in your portfolio's performance. The planner and adviser can help to build the plan and keep you on track, but final investment decisions are yours to make. Providing clear direction helps achieve a more satisfying involvement.

Upgrading Education and Skills

While upgrading your education and skills does not mean you need to become a Chartered Financial Analyst (although it would definitely help), understanding more about investing, analysis and economics has been something that the wealthiest families in the world have made a priority. For investors with a plate full of other professional requirements, turning leisure reading on vacations and weekends toward investment-related topics might just be enough. This also helps us provide better direction to the planners and advisers who are building our portfolios for us.

While both of these take-aways are certainly related, most of us fail to adopt them in our own lives, yet we question why our portfolios are under-performing or why our planners and advisers always seem to make poor recommendations or give us "bad" advice. By getting even a little more involved with the investment process, we can make sure that our advisers know exactly what it is that we want to see before we can properly make an investment decision. Of course, this process makes sense to us, but few of us actually take these steps.

--> Are Index Funds the way to go? Find out more at the Mutual Fund Site.

Chris has more than 17 years of financial services experience. He will be contributing articles about Index Funds to the Mutual Fund Site over the next month.